Chinese artificial intelligence: The rise of the new superpower and the challenge to U.S. hegemony

The global technological landscape has undergone a radical shift in which the race for dominance is no longer limited to military power or traditional economics. Artificial Intelligence (AI). Today, China, with its stunning advances in this field, stands to pose an unprecedented challenge to the United States. This competition is not just a race to build the biggest model, but a deep strategic struggle over how to integrate AI into the core of the economy and society. In this report, we review China's unique strategy, compare its grand models, and analyze the geopolitical dimensions of this conflict, with a special focus on the direct impact on the Middle East and Saudi Arabia.

1. The global AI race: China and the United States' opposing strategies

1-1. Artificial General Intelligence (AGI) vs. Industrial AI: Where does the focus lie?

The fundamental difference between the two superpowers' strategies lies in the definition of "success" in AI. The U.S., led by Silicon Valley companies, is primarily focused on achieving Artificial General Intelligence (AGI)that is, the development of systems capable of self-improving and outperforming human cognitive abilities in a wide range of cognitive tasks. This focus is embodied in massive language models (LLMs) such as GPT-4, which require massive investments in supercomputing and big data. In stark contrast, China is adopting a different strategy, focusing on integrating AI into "Material Economy" on a grand scale. China's goal is not necessarily to build the "most beautiful model," but to achieve "Comprehensive Smart Transformation" for industrial production. This includes the deployment of "Embodied Artificial Intelligence" In factories, via intelligent industrial robots that don't necessarily require the massive infrastructure that powerful Western chatbots need. For Beijing, success is measured by AI's ability to increase manufacturing efficiency, security, and national productivity. This strategic asymmetry makes the competition between the two countries a multifaceted race, not just a direct confrontation over the same goal.

1-3. [America and China Strategy Comparison Table]: Who has the better hegemonic plan?

2. Greater China AI Models (LLMs): Superior efficiency at lower cost

2-1. DeepSeek shakes up global tech markets: Performance and cost under the microscope

DeepSeek has emerged as a true symbol of China's ability to compete intelligently and efficiently. The DeepSeek model generated widespread buzz, not only for its technical capabilities, which claimed to outperform leading Western models such as ChatGPT in some metrics, but more importantly for its low cost of training and operation. While Western models require hundreds of millions of dollars for infrastructure. DeepSea claimed that the costs of training its V3 prototype were remarkably low (estimated at around US$5.6 million for GPU rentals). This sent a wave of anxiety to global investors. The announcement caused Stocks of US tech giants such as Nvidia (which lost nearly $600 billion in market capitalization in a single day) and Microsoft fell sharply and temporarily. DeepSeq's superiority was no accident; the Janus-Pro professional version has proven itself capable of generating images that rival the DAL-E3. This model represents a turning point: The ability to produce high-quality models at lower costs directly challenged the economic advantage U.S. companies had in monopolizing investment in large-scale hardware.

2-2. Comparison of giants: Baidu, Alibaba, ByteDance and open competition

The scene is not limited to DeepSec alone, but includes fleets of models backed by China's largest Internet companies, competing with each other to offer superior solutions in various sectors:

• Baidu and "Ernie": The Erni robot is the first of China's AI prototypes to come to life in 2023. Despite initial launch challenges, Erni has reached more than 340 million users and leverages Baidu's dominance in China's search engine industry to provide live text and image generation.
• Alibaba and "Qwen 2.5": Alibaba launched Coin 2.5 as a model Open source Superior, designed to handle long, complex questions and tasks that require logical thinking. With its focus on corporate business use, Alibaba seeks to establish its model as the standard for organizations.
• ByteDance and "Doubao 1.5 Pro": Leveraging its computing power and complex algorithms at TikTok, ByteDance has introduced Dubao 1.5 Pro to excel at handling Chinese languages and retaining information and code. The company emphasizes that its model has the advantage of being less expensive and does not require supercomputers to run.
• MoonShot and "Kimi K1.5": This startup, which Valued at $3.3 billion (at last valuation)focused on Quality and accuracy of answers Even if it takes longer to respond. "Kemi is able to understand and analyze images, text, and videos, making it a strong contender in complex analysis tasks.

2-3. Innovation in Chinese AI: The New Generation of Agent AI

Not content to compete with traditional LLM models, China has begun to drive innovation toward the next generation of artificial intelligence, a concept that "Agent AI". This concept consists of intelligent models that can automatically break down a complex task into subtasks and execute them more accurately. GLM-4.5 model from Z.ai (Zhipu AI's brand name, backed by large investors, including Aramco-backed funds such as Prosperity7 Ventures) is a perfect example. The model, which is half the size of DeepSec, requires only a few NVIDIA H20 chips to run, making it a cost-effective solution suitable for an export-restricted environment. The focus on agents represents a strategic shift towards enabling AI to act as a virtual CEO, rather than just a chatbot. This innovation focuses on practicality and productivity, which is in line with China's strategy of industrial dominance.

2-4. Cost analysis: Why Chinese models are more price-efficient than ChatGPT

The most appealing feature of Chinese models, especially for organizations in fast-growing markets like the Gulf region, is Massive Price Efficiency. Cost is measured by reference to the number of "tokens" used for input and output. While Western models, primarily OpenAI models, charge high prices for supercomputing services, Chinese models offer incredibly competitive prices:

• DeepSeek R1 and GLM-4.5 They charge as little as 11 to 14 cents per million tokens, compared to much higher rates for Western competitors.
• As for the cost of output codes, the difference is much greater.

This efficiency is due to two main strategies: First, the focus of some models (such as GLM-4.5) on being Open-Source, which reduces licensing costs for developers. Second, the Chinese understanding of developing models that can run efficiently on modified or less advanced chipsets (such as Nvidia's H20 chipset for China), reducing the huge capital expenditures needed for training and operation. This advantage makes Chinese AI an option that cannot be ignored for companies seeking to achieve large-scale digital transformation in a financially efficient manner.

3. Geopolitical dimensions: The war for chips and rare metals in China's AI race

3-1. U.S. export restrictions: NVIDIA's advanced chip weapon and China's AGI limit

The United States has used its technological superiority in semiconductor design and manufacturing as a strategic weapon to limit China's progress, especially in the field of artificial general intelligence (AGI). These measures consisted of severe restrictions on the export of the most advanced graphics processing units (GPUs), which are vital for training large linguistic models. These chips, such as certain generations of NVIDIA chips (such as the H100 and A100), are the computing backbone required to build AGI models that compete with OpenAI. Washington's clear goal was to impede China's race toward AGI, which it considers a matter of national security. Although companies like NVIDIA have attempted to roll out modified chips (e.g. H20) to meet Chinese market requirements while complying with the restrictions, these measures remain a major challenge for China in achieving full parity in very large-scale models.

3-2. Chinese counter-hegemony: Why is controlling rare metals more important than chips?

In response, Beijing has responded with a strategy of "input control." China realizes that America's superiority in software design today does not guarantee its dominance tomorrow if it loses the ability to manufacture advanced technologies. China realizes that America's superiority in software design today does not guarantee its dominance tomorrow if it loses the ability to manufacture advanced technologies. Rare metals and biominerals (such as gallium, germanium, nickel, cobalt, and graphite) are essential components for making advanced chips, sensors, and batteries. China has near-total control of the global market in the refining of these materials and many of their processing technologies. China's restrictions on the export of some of these minerals represent a tactical strike aimed at securing China's national security and strengthening control over global production chains. In other words, while the US can deprive China of chips today, China can make it very difficult to manufacture these chips and other advanced technologies in the future, elevating the importance of these strategic materials beyond the chips themselves in the long run.

4. Opportunities and Challenges of Chinese AI in the Middle East and Saudi Arabia

4-1. GCC investment map: The role of Aramco and Chinese strategic partnerships

The GCC countries, led by Saudi Arabia, see Chinese AI as a real opportunity to diversify technology sources and break free from dependence on a single source.

• The role of Aramco: Prosperity7 Ventures, the Aramco-backed investment arm, plays a vital role in funding Chinese AI startups. This investment is not only financial, but a gateway to transfer advanced technical know-how to the Kingdom and secure strategic partnerships.
• The Need for Diversity: Gulf countries are adopting a balanced approach in dealing with the major technological powers (US and China) to ensure their technological security and stabilize their supply chains. China's low-cost, high-efficiency models are particularly attractive for large-scale digital transformation plans.

4-2. Specific applications and localization: How does Chinese AI serve projects like NEOM and Arabic language support?

China's AI model, with its focus on embodied AI and industrial solutions, can bring exceptional value to the Kingdom's megaprojects:

• Smart City Projects (NEOM): China's expertise in integrating AI with manufacturing and robotics can be leveraged in building smart infrastructure and future factories in NEOM and other economic cities.
• Energy sector: Smaller, production-oriented AI applications (which China is focusing on) could revolutionize predictive maintenance, improve the efficiency of oil and gas extraction, and develop renewable energy projects.
• Arabic language support and Arabization: Although Chinese models are primarily designed for the Chinese language, the rapid development and open-source environment of some of them represents an opportunity for Saudi universities and research centers to work on Arabizing these models and training them on huge Arabic datasets, to increase the accuracy of their understanding of the Arabic language and its dialects, thus enhancing the technological independence of the region.

5. The safe use of Chinese artificial intelligence: Risk Assessment and Governance in the Gulf Market

5-1. Data risk and connectivity: Can Chinese models be trusted?

The adoption of Chinese AI models faces a major challenge of data risk and government involvement. These models are often stigmatized due to their suspected association with the Chinese government and the possibility of leaking user data. There have been previous incidents, such as data stored in Chinese models appearing on hacker forums, raising serious questions about the security and privacy of sensitive data, especially for government agencies and large corporations in the Gulf. Data governance requirements in Saudi Arabia and the GCC require strong assurances that data will be processed and stored locally and in compliance with national privacy and cybersecurity laws. Businesses and government organizations in the region should carefully assess these risks before expanding the use of these models.

5-2. [Checklist for evaluating a Chinese AI model]: 5 steps to ensure compliance and business security

To mitigate risks and ensure safe use and legal compliance when adopting Chinese AI models, we recommend following the following checklist:

6. Conclusion and forecast: The future of Chinese AI and its economic efficiency

Chinese AI has established itself as a global power, challenging US hegemony not by replicating Western strategy, but by pursuing a different path focused on economic efficiency and industrial integration. The future competition will shift from a race of speed and size (the biggest model) to a race of diffusion and economic efficiency (best performance at lowest cost). China's strategy of integrating AI into manufacturing and controlling critical inputs (rare metals) ensures long-term geopolitical influence. For the Middle East, this rise represents a golden opportunity to diversify technology partnerships and realize the goals of the 2030 Economic Vision by adopting low-cost, industrially viable AI solutions, provided that data governance and security issues are strictly addressed.

7. [Frequently Asked Questions (FAQ)] on recent developments in Chinese AI